XVI. Radon Memorandum Account

AVR and ORA differed on the need to establish a Radon memorandum account. AVR requested authority to establish this memorandum account so that it could comply timely with the United States Environmental Protection Agency's (EPA) revised Radon regulation that AVR anticipated would be issued in late 2002 or early 2003.

AVR made this request as part of its GRC filing and prior to EPA's adoption and issuance of revised Radon regulation because the Commission's Water Division informed AVR that "no new constituent can be added to a utility's existing water quality memorandum account unless requested by the utility in the general rate case process or by separate application."⁴⁶ AVR wants the memorandum account so that it can implement the revised regulation without compromising its financial integrity and without waiting for its next GRC or approval of a separate application. It sees no difference between its request and the Commission's D.01-03-078 approval of a similar request by AVR's sister Division, Central Basin.

ORA opposed this request because AVR could not identify what impact, if any, AVR's compliance with unknown revised regulation would have on AVR's expenses, capital costs, and earnings.

The purpose of a memorandum account is to allow a utility to track changes in expenses and capital costs incurred for a specific purpose. In this case, AVR requested the memorandum account so that it could track changes in EPA's Radon regulation that may impact AVR and may require AVR to incur additional expenses or additional treatment facilities to comply with unknown EPA revisions expected to be issued in the near future.

However, AVR is unsure whether it will need to incur additional expenses or capital costs to implement the changes and is unsure when EPA will issue the revised regulation. Even if EPA changed its Radon regulation requiring AVR to incur additional costs, AVR has not established that it would be required to immediately comply with the changes.

What is known is that EPA has undertaken a review of its Radon regulation for at least two-years. It is also known that the Commission issued a decision authorizing the establishment of a similar memorandum account cited by AVR resulting from the adoption of a settlement agreement. However, as addressed in our prior O&M Payroll discussion, Rule 51.9 precludes adopted settlements from being used as a precedent for any principle or issue in any other proceeding. AVR's Radon memorandum account request is premature and should not be adopted.

Any change in EPA's Radon regulation would require all California Water utilities to assess the impact of those changes on their individual operations and, if impacted, assess what would be required to comply. This proposal is premature. It is more appropriate to address compliance after it is known what needs to be complied with and on an industry - not on an individual utility-basis. Accordingly, the Director of the Commission's Water Division should monitor EPA's Radon regulation review and upon EPA's issuance of any revised regulation consider the merits of issuing a generic investigation into compliance. At the same time, individual utilities should have the option of addressing know impacts through either GRC filings or separate applications.